IBL di­rec­tors ‘com­plicit 100 per cent’

Nairobi Law Monthly - - Cover Story - TNLM WRITER

In­ves­ti­ga­tions be­gin to re­veal for­mer di­rec­tors knew of fraud, ac­tively sought to cover it up and even sought CBK’S help to main­tain “pos­i­tive im­age” — Agency

“Truth will out”, the say­ing goes.

But the ve­rac­ity of this old dic­tum can at times con­found, or cease to make sense, par­tic­u­larly in in­stances where a lie is man­u­fac­tured, watered and tended to, to blos­som into an al­ter­na­tive truth, one that then be­comes the bench­mark for what is to be said and/or be­lieved. It is this “al­ter­na­tive truth” that the Cen­tral Bank of Kenya be­lieves has been ped­dled and fed to the Kenyan pub­lic re­gard­ing the Im­pe­rial Bank saga.

The ad­mit­ted fraud at Im­pe­rial Bank Limited (IBL) was al­legedly done un­der the pa­tron­age of a for­mer group man­ag­ing di­rec­tor, the late Ab­dul­ma­lik Jan­mo­hamed, in com­plic­ity with se­nior man­agers. That ad­mis­sion was made in a pro­posal re­quest­ing CBK to place the bank un­der statu­tory man­age­ment for a brief pe­riod, and fa­cil­i­tate the open­ing af­ter­wards.

When CBK an­a­lysed the pro­posal and ad­mis­sions, it im­me­di­ately placed the bank un­der re­ceiver­ship; the level of fraud was stag­ger­ing. This ap­pears to have caught the di­rec­tors, who had ex­pected a favourable re­sponse, off-guard. The CBK, to­gether with the Kenya De­pos­i­tory In­vest­ment Cor­po­ra­tion (KDIC), em­barked not only on in­ves­ti­gat­ing the ac­tiv­i­ties of the late GMD and man­age­ment, but also those of the board of di­rec­tors and share­hold­ers, to de­ter­mine their role and the ben­e­fit if any.

What fol­lowed was a sus­tained on­slaught against CBK and KDIC by a PR firm com­mis­sioned by cer­tain in­ter­ested par­ties in the mat­ter. This, how­ever, did not de­ter the CBK and KDIC from car­ry­ing on with foren­sic in­ves­ti­ga­tions into af­fairs at the bank which, it would emerge later, go back 13 years.

And whilst the story of the di­rec­tors and share­hold­ers has been re­peated ex­ten­sively in so­cial and main­stream me­dia, the CBK po­si­tion was fi­nally re­vealed in an af­fi­davit filed on Fe­bru­ary 28, 2016, “to pro­vide a fac­tual rep­re­sen­ta­tion of the mat­ter” and, separately, “to cor­rect mis­lead­ing po­si­tions taken on the role and in­volve­ment of the CBK”.

Au­di­tors who don’t au­dit

In the af­fi­davit, Mo­hamud Ahmed, KDIC’S ap­pointed Re­ceiver Man­ager for Im­pe­rial Bank, was re­spond to con­ser­va­tory or­ders sought by the for­mer di­rec­tors of the bank, which he terms as “a bla­tant at­tempt to stop the foren­sic in­ves­ti­ga­tion into the ad­mit­ted grand theft of Sh38 bil­lion”, to en­sure its ex­tent and per­pe­tra­tors are not re­vealed.

He avers, for starters, that the au­di­tors of Im­pe­rial Bank, PKF Kenya, who have been re­tained since the bank be­gan oper­a­tions in 1992, had been com­pro­mised through a mas­sive loan at con­ces­sion­ary in­ter­est ap­proved by the di­rec­tors to the part­ners of PKF Kenya ‒ trad­ing as East Africa Prop­erty Hold­ings (K) Limited ‒ which pre­vented them from ren­der­ing ac­cu­rate au­dits and con­ceal­ing the un­der­ly­ing mon­u­men­tal fraud.

At the point of re­ceiver­ship, the af­fi­davit goes on, East Africa Prop­erty Hold­ings (K) Ltd had been listed as num­ber 16 in the list of “Top 50 bor­row­ers” at the bank, with an ex­po­sure to IBL of Sh371 mil­lion at an in­ter­est rate of 19pc, which had been agreed with PKF in re­la­tion to a three­month de­posit be­ing placed by East Africa Prop­erty Hold­ings (K) Ltd.

Fol­low­ing the death of Jan­mo­hamed, the new ap­pointed di­rec­tors be­came the prin­ci­pal of­fi­cers used to ef­fect the fraud. Th­ese are Naeem Shah and James Kaburu who were ap­pointed as act­ing man­ag­ing di­rec­tor and deputy man­ag­ing di­rec­tor re­spec­tively, in act­ing ca­pac­i­ties. The bank’s board ap­pointed them in full knowl­edge that the two were re­spon­si­ble for fraud­u­lent ac­tiv­i­ties in IBL. In fact, ac­cord­ing to an af­fi­davit sworn by Naeem in De­cem­ber last year, they had in­struc­tions “to keep cov­er­ing up the fraud”.

For­mer Im­pe­rial Bank board chair Al­nashir Popat.

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